Recession fears rise as economy shrinks for second straight quarter

DETROIT (FOX 2) - The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession.

The decline that the Commerce Department reported Thursday in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, an indicator of a recession.

While most economists say this means we're in a recession, the  National Bureau of Economic Research (NBER) makes the final call on whether the US is officially in a recession. But does that matter if consumer confidence and economic sentiment are muted.

The mindset of the average American matters and certain metrics, like the inflation increase of 9.1% year over year, is an indicator that, in basic terms, it just means that it’s more expensive to buy what you need and want. People feel that and make changes. 

As big tech companies miss earning marks and the fed raises interest rates, the employment rate is at 3.6%. 

"Officially, we are not in a recession because, of course the National Bureau of Economic Research, has got their dating committee that essentially decides if we're in a recession or not and they do it retrospectively. In some respects this is a debate over semantics that really doesn't matter because the truth of the matter is you've got recessions and then you've got recessions," said Dr. Michael Greiner from Oakland University.

Consumer spending has slowed slightly and home construction was down 14 percent year over year, stocks rallied despite the negative GDP news, suggesting perhaps economic conditions could be much worse. 

"People seem to be holding onto their money a little bit more and are getting a little bit more concerned about the economy and their jobs and what's going to happen in the long run. The truth of the matter is, that's what the fed wants. They're trying to get people to hold back on their spending a little bit because that's what reduces the demand and then enables inflation to stabilize a little bit," Greiner said.

President Biden, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen have all towed the party line… saying the US is not in a recession 

"The labor market remains exceptionally strong. That is not what we see in past episodes that the NBER has labeled to be a recession," Yellen said.